Wang Shi is founder and chairman of China Vanke, the world’s biggest home builder by revenue, and recognizes that China has a problem with the oversupply of housing.
The city of Yingkou, near the border with North Korea, is just one city where this oversupply cannot be missed. Among gleaming new apartment buildings run 8 lane highways, snaking past an Olympic-themed sports center. The only problem is that there is no one here, writes Jane McMullen for the BBC.
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Housing oversupply leaves ghost towns in China
“It’s a real problem,” said Wang Shi. “Many cities have an oversupply of housing.” Vanke also has a development in Yingkou, which Wang admits has come into some difficulties. He would not let the BBC journalist take a tour of the property.
All over China there are empty developments waiting to be filled, evidence of a construction boom that drove fast economic growth but has now stalled. However Wang Shi is not worried.
“In the west, if a city faces financial difficulties, it’ll go bankrupt. But in China, cities will be subsidised by the Ministry of Finance. So some small- and medium-sized cities aren’t worried about going bankrupt. They figure the central government will help them out,” he said.
Promise of Beijing bailout shores up confidence
It may seem amazing, but the Chinese developer is convinced that central government will bail out companies and local authorities should they get into financial difficulties. Careless spending by Chinese local governments has contributed to the largest debt bubble the world has ever seen, and it cannot keep growing forever.
Wang Shi is now working to help China solve its economic problems. “We have influence. That prompts the question, is this influence there to bring a product to market? Or does it mean social responsibility, helping to shape the future of the market?” he said.
Wang and Vanke are helping to promote pre-fabricated and low-carbon buildings, tapping into frustration at high levels of pollution in China. Despite rising borrowing costs and slowing profits, Vanke is still in good shape.
Wang Shi is starting to look abroad for business as the financial situation in China becomes riskier. “We are establishing an international network: San Francisco, New York, London, Berlin, Paris. We are targeting the Chinese market as they buy overseas,” he said.
There are concerns that Chinese investment in foreign property could expose host countries to a future Chinese property crash, but Credit Suisse analyst Jinsong Du believes that Beijing will support the largest developers if they got into trouble.